Expected Return a Company's Current Stock Price Is $65

question 101

Multiple Choice

Expected Return A company's current stock price is $65.40 and it is likely to pay a $2.25 dividend next year. Since analysts estimate the company will have a 11.25% growth rate, what is its expected return?

• A) 3.44%
• B) 3.61%
• C) 11.25%
• D) 14.69%

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Definitions:

Deadweight Losses

Economic inefficiencies that arise when market equilibrium is not achieved, often resulting from monopolies, taxes, subsidies, or price controls, leading to lost welfare for consumers or producers.

X-inefficiency

The difference between efficient behavior of businesses under competitive environments versus the inefficiency that arises in the absence of competition.

Competitive Firms

Companies that operate in markets where no single firm has the power to influence the price of goods and services significantly.

Monopolistic Firms

Companies that have significant control over the market for a particular good or service, allowing them to influence price and production levels.